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How does founder reverse vesting work under UK company law?
Under English company law, founder shares are issued upfront upon incorporation, and reverse vesting is implemented through a shareholders' agreement or company articles giving the company or remaining founders a call option to repurchase unvested shares at nominal value (e.g. £0.0001 per share) if a founder leaves before completing the vesting schedule.
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Related questions
- Why are founder shares issued upfront in the UK instead of vesting over time?
- Issuing shares upfront establishes the founder's ownership from day one and avoids future income tax liabilities that could arise if shares were granted later as employment-related securities at a higher valuation.
- What happens to unvested shares if a founder leaves as a bad leaver?
- Under standard UK startup articles and shareholders' agreements, a bad leaver must transfer their unvested shares back to the company or other founders at nominal value.
What this answer does not cover
- This answer describes general startup practice under English company law. It does not replace advice on tax elections (such as section 431 elections) or specific shareholders' agreements.